Thursday, April 28, 2005

The Maytag Repairman Gets Even Lonelier

A good buddy of mine who should have been laid out by now has been terminally ill for a long time. He was always complaining that he was the "the loneliest man in the world." A depressing fellow, really, who reached the top of his trade by theoretically having built appliances with such care and quality that nobody ever called him for repairs.

You may have known him: the Maytag Repairman.

In case you missed it, Reuters news service recently noted that, "struggling appliance maker Maytag Corp.... reported an 80 percent plunge in quarterly profit on lower sales and higher steel and energy costs, and slashed its full-year outlook. Maytag, the maker of Hoover vacuums and Jenn-Air and Amana appliances, said its full-year profit would about half what it had previously forecast, and its shares fell 8 percent in pre-market trade."

Wow. Here was a brand that staked its entire reputation – built its entire history -- on being "the dependability people" suddenly gasping for air. This was a company that for years placed a succession of sour-faced Maytag Repairmen in front of the American public, complaining of their loneliness because nobody ever called them to repair a Maytag machine.

How times have changed.

"There's a serious credibility issue developing around the management of this company," said David MacGregor, an analyst with Longbow Research. "As a result, it might be time for the board to shift to Plan B," or more crisis management. "The core of the problem has little to do with cost," MacGregor said. "It has more to do with not being competitive and not having a competitive product offering."

The Reuters article goes on to state that, "the disappointing results and lowered outlook were the latest in a series of setbacks for Maytag, which has been struggling to reverse a prolonged slump at its Hoover vacuum unit and reduce its overall costs, which analysts have said are higher than other appliance makers." And then Mr. MacGregor drives a stake right into the heart of the matter:

"There are strong brands, good retail distribution for the time being but those things have a half life," said Longbow's MacGregor. “If the board doesn't get involved and do something relatively soon, the intrinsic value of those intangible assets will continue to diminish.”

Gee, ya think those "intangible assets" might have something to with management that has no idea of what a brand is?

Maytag’s stock price is half of what it was 12 months ago. If ever there were a brand in an iron lung, this one has to be it. And the reason, no matter what Maytag’s board of directors are telling the press, is not that steel prices are going up. It’s what I call Caretaker Management Syndrome, which has now reached pandemic proportions throughout corporate America.

If you haven’t heard of CMS, it’s probably because I just made up the term, coined after realizing that the syndrome itself has undermined many of America’s most trusted brands. The way it works is similar to the theory of Three Generations of Wealth, in which the first generation creates the fortune, the second generation spends it and the third generation loses it. Many American brands are victims of third generation "caretaker" managers, who themselves never had to build the very brands they’ve been charged to manage. Living off the fat of the land, they’re complacent managers who fear innovation and risk, the type that figure their brand will always be there, because it was always there for their fathers and grandfathers.

The trouble is it doesn’t work that way. The grandfathers who built the brands knew the power of a brand. They knew how to constantly build and reinforce their value. Caretaker managers, however, spend more time on the golf course than they do building brand value. In fact, most CXO’s don’t truly understand what a brand is, let alone how to build its value. And so while the caretaker managers might hold hands, close their eyes and wish real hard, their brands continue to wither from neglect, with market shares shrinking into a mere slivers of what they once were.

I guess this wouldn’t bother me so much if I knew that better, stronger brands were eating Maytag’s lunch. But I have a sneaking suspicion that it’s the boys in the corporate ivory tower that are really to blame. Guiding their decisions by balance sheets instead of real brand and marketing strategy, they completely undermine and undervalue the most powerful asset their companies possess: their brand. They discount the trust and values their fathers spent decades cultivating and nurturing, because they know nothing of trust and value.

You want proof? How about this: Over the last decade, the actual number of appliances that Maytag actually builds and markets is down to one machine. That’s it. Everything else is built by some other brand and slapped with a Maytag label. Sticking a high-end lable on to a substandard product may look good on the income statement for a quarter or two, but there are two things wrong with it:

First, it undermines your brand. Second, people start launching class-action lawsuits. Both have now hit Maytag broadside, as the number of lawsuits Maytag is fighting – and losing – have come home to cost the brand more than "the cost of steel" ever could.

This is the story that American business media continues to miss. The widespread ignorance of branding is a scourge on the economy that’s going to get a lot worse before it gets better. Today, if you really want to find the loneliest person in the world, don’t look for the Maytag repairman.

Thursday, April 14, 2005

Wal-Mart: Always the Low Road

Whoever said you can't put a high enough price on a good reputation obviously wasn't talking about Wal-Mart, whose never-ending battle against public outcry took yet another leap into the abyss this week with a whole new public relations spin. This time, it appears that Wal-Mart is sticking a crowbar into its wallet and coughing up some $35 million bucks, that according to AdAge, "is a partnership with the National Fish and Wildlife Foundation and will preserve 88,000 acres and an additional 100,000 acres over the next five years."

Um, okay. So Wal-Mart is buying cheap land? In an effort to say what, exactly?

Keep in mind that the $35 million Wal-Mart plans to spend is barely a drop in the bucket compared to their annual advertising, merchandising and promotional campaigns. But that's really beside the main point, which is this charade's incredible transparency.

In the first place, Wal-Mart - yet another store with no brand strategy - has been a media victim for years now. The (no pun intended) target of social environmentalists everywhere, Wal-Mart has allowed itself to become the focus of urban myths, the most egregious of which portrays the store as a monolithic predator that moves into small communities, sucks the enterprise out of them and leaves nothing but its skeletal remains once it has finished feeding.

Of course, the proof of that particular urban myth has never been documented, to my knowledge. And the lack of that proof has never been given the same media attention as the myth itself. In fact, it may be that myth is 100% untrue, but then again, who cares? It's the myth that generates television ratings. Scarier still, the myth has gained so much momentum as to actually mobilize typically apathetic urban communities to launch civic movements preventing Wal-Marts from invading their spaces.

Now Wal-Mart is fighting a battle on a second front. It's "Acres for America" is possibly the most pathetic effort to flim-flam the American public since Gerald Ford sought a national anthem to "Whip Inflation Now" (no kidding, if you're not old enough to remember it, the president of the United States actually thought that if he could get enough Americans to sing about whipping inflation, the economy would recover). Apparently, Wal-Mart believes that if enough people watch their TV spot, everyone will suddenly drop their objections to whatever it is that Wal-Mart is accused of doing. This media practice is not without precedent. I believe it was Joseph Goebbels who called it "the big lie." Slap up enough posters with enough lies on enough walls, he maintained, and people will really start to believe it.

The problem is that Americans are as not stupid as Wal-Mart would like to think. Unfortunately, we can't say the same thing for Wal-Mart's management. And to think, both of these fiascoes could have been avoided if only Wal-Mart had a brand strategy.

"Hey," I can hear you saying, "Wal-Mart does have a brand strategy. It's 'Always the Low Price.'" To which I reply, "Nope. What you have there is a tag line and a bad one at that. But it ain't a brand strategy." Here's why:

1. Price strategy is no strategy. For a brand to really work, you have to provide a host of reasons why people should pay MORE for your goods, not less. The minute you hang your hat on price, you're dead meat, because anyone, at any time, can undercut your price. That's what loss leaders are all about. The more reasons you give someone to choose your brand as the only solution, the less important price becomes as a decision factor.

2. When you put your brand out there to compete with low bidders, price is all anyone looks at. Nobody stays loyal because of a low price. It works to the exact opposite purpose: if they know you're only about price, you're actually encouraging them to shop around until they find that lower price. You're literally asking them to go someplace else.

3. If you don't have a brand strategy, you leave yourself open to interpretation of your brand, which is really, really bad. Since Wal-Mart has no brand strategy - they don't stand for anything - they have no track record against which they can rebut the silly stories that make it into the media. In my book, I discuss one of my favorite brands: Sears Craftsman tools. With Craftsman, the quality is guaranteed for life. Which means if your grandchildren have a problem with a wrench, they can take it back for a new one. That's a brand strategy. That's Sears standing behind their word. So you can bet that people think twice before lobbing media grenades at Sears; Sears has a great track record with that brand. Sears gets the benefit of the public's doubt, while Wal-Mart gets petitions to keep them out of the neighborhood.

Same store sales at Wal-Mart are dropping like flies. Wal-Mart responds with stock footage of endangered eagles flying through the sky and a program to snap up a few acres here and there. See, these guys just aren't thinking. What they should have done is import wool hoods from China and sell them at a special low price, and then pray that everyone would pull them over their eyes.

Tuesday, April 05, 2005

Flying Trucks, Surfing Cars

I live in the automobile capital of the world. Oh, I know that some would argue that Detroit, Michigan, is the Mecca or all things automotive, but that's not true. Detroit may be where they used to make a lot of cars, but Los Angeles is where people live in them every day. The average Angeleno spends a minimum of two hours a day in something with wheels, usually surrounded by loud music, snarled traffic and cup-holders jammed with fast food.

Not surprisingly, the car has long since evolved from a transportational issue into one of status. Out here on the west coast, you are what you drive. In fact, entire relationships can be won or lost simply on your make, model and year. Ask any strapping young buck at the bar and he'll tell you that it's easier to snag a starlet with a red Ferrari than a rusted Buick.

All that isn't terribly new. Ever since the cavemen traded in their clubs for cash, wealth has become the aphrodisiac of choice. Believe me, men don't build tall buildings and great bridges out of love for their fellow man. Frequently, it's out of love for their fellow women.

But I digress.

Back to the automobile, where you might find the likes of American, Asian and European brands competing for the affections of the American consumer on a daily basis. You can't turn on a television, listen to a radio or open a print publication without being assaulted by perhaps the largest category advertiser on the planet. Cars are big ticket items, and as such, dominate the airwaves with their attempts to lure us into their showrooms.

Strange, then, why so many of their ads are so wildly oblique. Query the folks to whom these ads are targeted and you scarcely find one that can name any reason why they would choose one brand over another.

It's no wonder. For the life of me, I can't figure out why trucks are shown leaping through the air, flying over cactus, dusty roads and a mouse type disclaimer advising, "Trained professional on a closed course...do not attempt." Huh? If I'm not supposed to get all four wheels up in the air, why are they selling it that way?

I also don't understand the compulsion of hosing down blocked-off city streets and having late model sedans spin 360 degree circles. Is this supposed to turn me on? Am I supposed to envision myself dropping off the kids at carpool by hooking the steering wheel and fishtailing in front of the cafeteria? If anything, showing the car hydroplaning through two inches of street water communicates that this crate can't hold a straight line in even the lightest of rain.

What's going through the minds of the geniuses creating this kind of advertising? Nothing, mostly. There's no brand message. No reason to choose this truck or that car. In fact, all that really comes through is the last five seconds of the ad, where big white letters and a booming announcers' voice let me know that the manufacturer is offering still more cash back and even better rebates. That's what happens when entire generations grow up watching MTV and thinking that with enough music and airplay, anything can be a hit.

No wonder car sales are sucking wind.

Here's a nifty idea: How about giving consumers a reason to buy the car? How about hiring people who actually know how to write compelling brand strategies so that the millions of viewers can understand how to evangelize the brand? Radical, eh? Think about it. The thought of people watching a TV spot just one time - and actually comprehending it. Sales going up. Customer acquisition costs going down. Consumer loyalty increasing. Competition decreasing.

Is it as exciting as jumping trucks over sand dunes? Nah. At least, not until you read the next year's annual reports. Then you could see white men in business suits jumping up and down with glee, blowing their newfound bonuses on - what else - brand new red Ferraris.